Sportsman's Warehouse Holdings, Inc. (NASDAQ:SPWH) Q2 2019 Earnings Conference Call - Final Transcript

Aug 28, 2019 • 04:30 pm ET

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Sportsman's Warehouse Holdings, Inc. (NASDAQ:SPWH) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Greetings. Welcome to the Sportsman's Warehouse Second Quarter 2019 Earnings Conference Call.

[Operator Instructions]

I will now turn the conference over to Rachel Schacter of ICR. Thank you. You may begin.

Executive
Rachel Schacter

Thank you. With me on the call is Jon Barker, Chief Executive Officer; and Robert Julian, Chief Financial Officer.

Before we get started, I would like to remind you of the Company's safe harbor language. The statements we make today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which includes statements regarding our expectations about our future results of operations, demand for our products and growth of our industry. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described under the caption, Risk Factors, in the Company's 10-K for the year ended February 2, 2019, and the Company's other filings made with the SEC.

We will also disclose non-GAAP financial measures during today's call. Definitions of such non-GAAP measures, as well as reconciliations to the most directly comparable GAAP financial measures are provided as supplemental financial information in our press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC today, which is also available on the Investor Relations section of our website at investors.sportsmans.com.

Now, I'd like to turn the call over to Jon Barker, Chief Executive Officer of Sportsman's Warehouse.

Executive
Jon Barker

Thank you, Rachel. Good afternoon, everyone and thank you for joining us today. I will begin by reviewing the highlights of our second quarter performance, and then discuss our strategic initiatives that are driving market share gains, as well as thoughts on the remainder of the fiscal year. Robert will then go over our financial results in more detail and review our outlook, after which we will open up the call to your questions.

We are pleased with our second quarter results, which were above our expectations on the top line and towards the high-end of our outlook on the bottom line. For the quarter, net sales increased 4.2% to $211.8 million. Comparable sales increased 1.7%, which was better than expected due to continued strong performance across our mature stores and e-commerce platform. Gross margins declined 100 basis points for the quarter largely due to product mix shift and we had 90 basis points of operating expense deleveraged. We reported adjusted diluted earnings per share of $0.13 for the quarter. Robert will provide additional details in his section.

Before reviewing our Q2 comp results in more detail, I want to take a moment to discuss the industry backdrop. The competitive environment and our key growth strategies that are driving our market share gains. The outdoor sporting goods category remains highly fragmented with over two-thirds of all firearm units sold by independent dealers.

Given recent industry rationalization and changing competitive dynamics, including the category exit decisions of some competitors, we remain one of a few national retailers dedicated to outdoor sports including hunting and